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Synergy ONESOURCE Conference – We’re Baaaaaaaack!

By: James T. Hedderman Anli Chen David Flores |

Greetings and Happiest of Holidays to our True Readers.  Once again, our True Partners team attended the Synergy ONESOURCE conference (in Nashville) which was held in person after the 2020 virtual conference.  We’ve learned that after nearly two years of working remotely, many tax professionals are beating to a new song.  Whether a preference for remote work, in person, or hybrid, we’ve all adapted to a new tune these past two years.  Attendance was lower than 2019, but for many, being back in person and connecting with other Synergy attendees was a breath of fresh air.  This True Alert is intended to give you a glimpse of what we observed and learned from the conference this year.

What if?

One of the most inspiring moments for some of us was the opening Keynote presentation by Linda Bernardi.  Linda encouraged all of us to disrupt, innovate and lead as we strive to move the tax industry forward.  She advised that asking a simple “What if?” question can lead to major innovation.  “What if” questions allow us to drive change, create a vision for our future, and passionately move forward and persevere.  Fostering a culture of innovation in technology and collaboration with our teams will generate a return on our investments, and our people, who will come running back for more once small victories are achieved.

Enjoy the Journey: The changing roles of tax compliance and provision software

As we head into the Holidays and look forward to another provision and tax season, let’s strive towards additional disruption and achieve small victories.  As the process is repeated over and over, who knows where we’ll land.

The demands on tax departments have become increasingly challenging, thanks to growing complexity in global reporting requirements, the increasing sophistication of tax technical requirements, and the asks for greater auditability, transparency, and improved operational performance.

Many corporate departments find the need to implement tax software to modernize their tax departments. Meanwhile, we often see these pieces of tax software are considered, in most circumstances, a “destination.”   Either it’s where the manually calculated permanent or temporary adjustments are loaded in, or it’s where users type in ETR for their international entities, these pieces of software are considered where “the right answers should go to.”  The lack of a cohesive process flow can put your calculations at risk and should be well vetted for proper controls and tax considerations for variables that can shift your results.

In this year’s Corporate Synergy Conference, we see more enhancements focusing on integration and end-to-end process solution. These enhancements, when deployed successfully, can reduce the reliance on manual manipulations, optimize internal processes, and improve operational effectiveness and efficiency. In other words, implementing or enhancing your tax software is to shift their roles into a TRUE TAX PROCESS ENGINE.

As tax process engines, these software solutions have enhanced both their own features and capabilities in tax data collection, tax data enrichment, calculations, and their extension capability to integrate with upstream or downstream processes.

With these enhancements, we suggest tax departments take a comprehensive tax process review, including the detailed assessment of from data collection, data validation, calculation & review, to reporting and analytics. The detailed assessment will be the foundation for understanding where the capability gaps are, which features of the tax software are under-utilized, which calculations or spreadsheets are redundant to tax software, and what integrations can reduce manual and non-value-add data movements. Take our Tax Maturity Self Assessment!

Tax Departments as Visual Storytellers

‘Microsoft Excel is not responding’

Even reading that message can send a chill down the spines of tax professionals everywhere. How many times have departments utilized large, clunky files which continue to grow year after year? Historically this may have been the best option available to communicate data and metrics to key decision makers within companies. However, other tools now exist which can better assist leadership. The advent of data visualization and dashboard platforms (i.e. Tableau & Power BI) allow large quantities of data to be distilled into a readable and digestible format. These customizable and dynamic representations of the data can bridge the gap between departments and leadership, which allows for nimble decision making and a more cohesive process overall.

‘It was my understanding there would be no math’

Well, that’s why external tools can be helpful. Tax departments act as storytellers and translators, communicating metrics to key leaders and educating leadership of changing tax landscapes. By leveraging these external tools, departments can better craft narratives to communicate the clearest possible messages to those in decision making positions. The use of data analytics simply means identifying patterns and developing a better process based on recorded data, the visualization process is representing said data in a chart or visual format. The use of these two can eliminate what were once manual processes, drive efficiency, and help to eliminate human error. For example, using a tool such as Alteryx can help group a newly acquired entity’s trial balance into like-accounts instead of doing the whole process by hand. Then, one would be able to visualize it in an external program like Tableau to report the health of the entity to team members and management. The same could be communicated about key tax metrics (Effective Tax Rate, Current/Deferred Tax, Uncertain Tax Positions, etc.). Identifying a user’s Key Performance Inidicators (“KPIs”) are paramount in order to build a robust analytical approach. Identifying those key benchmarks and organizing them in a visual dashboard will be the foundation of building one’s process.

‘Look Good, Feel Good, Play Good’

Usability is at the core of implementing visualization tools in one’s process. One of the key points to keep in mind when constructing a dashboard is simply that it looks good. Users of data perceive objects that are aesthetically pleasing as more useful.  So if it is pleasing to the eye, chances are you will be able to communicate the message more effectively. This can be accomplished by keeping your data points high level, as drilling down into the details can overwhelm the end user and can muddle the point that is trying to be communicated. Also, incorporating white space can help. The visual must be able to be consumed easily.  Therefore, incorporating these strategies can help get one’s point across.

International Tax Changes

There was a lot of discussion about the impending international tax changes at Synergy this year. Let’s go over the big items:

Legislation

GILTI

Changing the GILTI calculation to increase the rate to 21% will be impacted in many ways by making significant changes to the calculation itself.  A move to a Country-by Country approach will not just make increases to the GILTI liability, but will also make the calculation much more onerous and laborious.  In addition to the change in the mechanics in the calculation to be Country-by-Country, there will be significant changes to the inputs such as the percentage subject to Section 250, percentage of QBAI, and the haircut on FTCs currently at 20%.

Minimum Tax

The potential 15% Minimum Tax on corporations will place a significant burden on corporations to calculate another tax, as companies still remember the pains of calculating the BEAT.  No guidance on the mechanics yet, though the Minimum Tax is said to relate to companies with a three-year average income in excess of $1 billion.

Section 250 Deduction

The Section 250 Deductions for FDII and GILTI were released as part of the 2017 TCJA and are said to have significant modifications as part of the impending Act.  For GILTI, these changes are said to boost the GILTI liability resulting in a higher GILTI rate greater than the previous 10.5%.  FDII is said to have an unfavorable modification to the rate from 37.5% to 24.8%.  FDII is also said to potentially have a modification to the taxable income limit that has changed many taxpayers applicability of the FDII as it coordinates with NOL utilization.

BEAT

BEAT is to see many potential changes, notably a widening of the net for taxpayers subject to the BEAT by removing the base erosion percentage test (beginning in 2024).  Significant change is the way the BEAT accounts for payments for the base erosion payments, previously included in COGS and excluded from the BEAT.  This will make the BEAT grow in excess of the 10.5% current rate.

Interest Expense Limitation

Section 163(j) creates a limitation on interest expense and the new legislation looks to further change the rules that were altered during the TCJA and Covid acts.  Additionally, a new Section 163(n) will introduce a more restrictive limitation of interest expense that considers the companies EBITDA vs the overall global EBITDA.

Excise Tax on Stock Buy Backs

A 1% Excise Tax on repurchases of corporate stock by publicly traded corporations is also part of the Act.  This can have an impact on how the C Suite decides to use cash going forward.

Thomson Software Solutions

Below are software updates to help make the compliance season easier, provide more automation and save time:

  • More automation with Form 8992 and 1118 interplay
  • More automation of Schedule Q and Schedule R data inputs
  • Consolidation of PTEP baskets on Schedule J and more labeling to better track
  • More modeling options in the GILTI High Tax Exception Report
  • More binder properties around sourcing for GILTI and Subpart F to assist with modeling (upcoming)
  • Potential Tax Reform Build Back Better enhancements
  • 163(j) implementation and population of Form 8990
  • R&D Updates to Form 1118 (Schedule H)
  • GILTI automation from Subpart F computes
  • More short order releases for automation for the next compliance season to Form 5471, 8865, 1118, 8992, K-2/K-3

It is still unknown if any of the above will pass and if so, when, so we encourage you to model the impacts for your company.  Let us know if you need help modeling out changes as we patiently await the final result (this year or next?).

We’re Here to Help

As you continue your journey with Thomson Reuters and ONESOURCE, reach out to the True Partners Technology team so we can ask “What if” together and contribute to your success.  We’ll be ready to disrupt your tax process together and drive innovation.  Success tomorrow starts with what we do today.